Kelso Builders Supplies Pty Ltd v Timbreck Pty Ltd

Kelso Builders Supplies Pty Ltd (the appellant) appealed to the New South Wales Court of Appeal against a decision of the District Court of New South Wales. The dispute concerned a claim by the appellant for payment for goods supplied to the respondent, Timbreck Pty Ltd. The respondent had raised a defence of set-off, alleging that the appellant had breached a separate contract between the parties.

The primary legal issue before the Court of Appeal was whether the respondent was entitled to set off its alleged losses arising from the breach of the separate contract against the appellant's claim for payment for the goods supplied. This involved determining whether the two contracts were so closely connected that a set-off was permissible, or if they were independent transactions.

The Court of Appeal held that the two contracts were independent. The contract for the supply of goods was a distinct commercial transaction from the contract under which the alleged breach occurred. Therefore, the respondent could not rely on a defence of set-off in relation to the claim for the price of the goods. The court applied the principle that set-off is generally only available where there is a clear connection between the cross-claims, or where the contracts are so intertwined that it would be inequitable to allow one party to recover without accounting for the other.

The appeal was allowed, and the judgment of the District Court was set aside. The matter was remitted to the District Court for determination of the appellant's claim for the price of the goods, without regard to the respondent's claim for set-off.